DoD Financial Management Regulation
Volume 3, Chapter 10
CHAPTER 10
ACCOUNTING REQUIREMENTS FOR EXPIRED AND CANCELED ACCOUNTS
1001 INTRODUCTION
100101.
Purpose. This chapter implements within the Department certain
provisions of Title 31, United States Code, relating to expired and canceled accounts. The
governmentwide amendments to Title 31 are contained in Title XIV of the National Defense
Authorization Act for FY 1991 (Public Law 101-510, dated November 5, 1990).
100102.
Terminology.
Terms associated with accounting for expired and closed or
canceled accounts are included in the definitions section (Appendix C) to this chapter.
1002 POLICY AND PROCEDURES
100201.
Implementation of Permanent Provisions
A. For 5 years after the time an appropriation expires for incurring new
obligations, both the obligated and unobligated balances of that appropriation shall be available
for adjusting and liquidating obligations properly chargeable to that account.
B.
Certain appropriations are available for obligation for a specific period,
i.e., annual and multi-year appropriations. Both the obligated and unobligated balances of such
appropriations shall be canceled, and will no longer be available for obligation or expenditure for
any purpose, on September 30th of the 5th fiscal year after an appropriation’s period of
availability for incurring new obligations expires (31 U.S.C. 1553(a)).
C.
Certain appropriations are available for an indefinite period. Obligated
and unobligated balances in such appropriations shall be canceled when (1) no disbursements
have been made from the indefinite appropriation for a period of 2 years and (2) the President,
the Secretary of Defense or his designee determines the purposes for which the appropriation was
made have been carried out (31 U.S.C. 1555).
D.
Before an account cancels, the affected DoD Component shall identify
valid unliquidated obligations subject to cancellation to determine if (1) appropriations are
available for future adjustments or payments against such obligations, or (2) other provisions for
adequate resources have been made to pay for such obligations that will cancel with an account.
E.
Following cancellation of an appropriation, should it become necessary to
adjust an obligation which would otherwise have been properly chargeable (both as to purpose
and amount) to an appropriation before cancellation, then the obligation shall be charged to an
appropriation currently available for the same purpose, subject to certain limitations discussed in
paragraph 100201.F., below.
10-1
DoD Financial Management Regulation
Volume 3, Chapter 10
F.
When a currently available appropriation is used to pay an obligation,
exceed the lesser of:
1.
which otherwise would have been properly chargeable (both as to purpose and amount) to a
canceled appropriation, the total of all such payments by that current appropriation may not
The unexpended balance of the canceled appropriation (the
unexpended balance is the sum of the unobligated balance plus the unpaid obligations of an
appropriation at the time of cancellation, adjusted for obligations and payments which are
incurred or made subsequent to cancellation, and which would otherwise have been properly
charged to the appropriation except for the cancellation of the appropriation); or
2.
The unexpired unobligated balance of the currently available
appropriation; or
3.
One percent of the total original amount appropriated to the current
appropriation being charged.
a.
For annual accounts, the 1 percent limitation is of the
annual appropriation for the applicable account--not total budgetary resources (e.g., reimbursable
authority).
b.
For multi-year accounts, the 1 percent limitation applies to
the total amount of the appropriation. As an example, if a multi-year account enacted for
FY 1992 through FY 1994 is $100 million, then the 1 percent limitation in FY 1992 would be
$1 million. If, at the end of FY 1992, $650,000 was used for payment of obligations of canceled
accounts, then the amount available to be used for such payments in FY 1993 would be $350,000
($1,000,000 minus $650,000).
c.
For contract changes (as specified in subsection 100202,
below), charges made to currently available appropriations will have no impact on the 1 percent
limitation rule. That is, the 1 percent (of the currently available appropriation) amount will not
be decreased by the charges made to current appropriations for contract changes.
G.
In order to prevent overpayments and ensure that applicable limitations are
not exceeded, DoD Components shall:
1.
Identify the unobligated balance and unpaid obligations of all
expired appropriations at the time they expire.
2.
Identify the unobligated balance and unpaid obligations of all
canceled appropriations at the time they are canceled.
3.
Identify to canceled accounts all obligations and payments charged
to currently available appropriations, which otherwise would have been properly chargeable
10-2
DoD Financial Management Regulation Volume 3, Chapter 10
(both as to purpose and amount) to a canceled appropriation (as provided for in paragraph
100201.F., above).
4.
Maintain identification of the amount for which it is permissible to
charge current appropriations for obligations and payments which otherwise would have been
properly chargeable (both as to purpose and amount) to a canceled appropriation. This amount is
determined by subtracting, from the unexpended balance of the appropriation at the time it was
canceled, all subsequent obligations and payments made as indicated in subparagraph
100201.G.3., above.
5.
Maintain proper general ledger controls for valid unpaid
obligations and receivables pertaining to canceled accounts. General ledger controls shall be
perpetuated until all obligations are paid and accounts receivable collected. (This will ensure that
valid liabilities continue to be tracked until satisfied, even though the accounts are canceled.)
100202.
Implementation of Contract Change Provisions Within the Department of
Defense
A. Public Law 101-510 defines a “contract change” as a change under which a
contractor is required to perform additional work. Subsections 100204 and 100205, below,
contain procedures for requesting approval of certain obligation adjustments for contract
changes.
B. Obligation adjustments, such as incentive or award fees and price inflation
(escalation or economic price adjustments), are not considered contract changes for purposes of
paragraph 100202.A., above. To the extent otherwise appropriate, such amounts maybe charged
to applicable accounts which otherwise have expired for incurring new obligation (but have not
yet been canceled). Such charges or adjustments shall be supported by comprehensive written
documentation containing a statement that the charges do not require, involve, or result in
additional work or changes in scope. This statement shall explain the circumstances,
contingencies, or management practices that necessitated the adjustment.
C. Title 10, United States Code, section 7313(b), and applicable appropriation
language, permit expired appropriations available to the Department to be used for new
obligations of appropriations for specific purposes. Those include payment to a Working Capital
Fund activity and payment to a contractor for unusual cost overruns and changes in the scope of
work for ship overhaul, maintenance, and repair.
1. While expired appropriations may be used in certain instances for new
obligations, these appropriations are not available beyond the end of the fifth fiscal year
following their expiration.
2. DoD appropriations--primarily Operation and Maintenance, Navy
appropriations--covered by 10 U.S.C. 7313(b) expire and are canceled at the same time as other
appropriations. These appropriations shall not be available for the payment of changes in the
10-3
DoD Financial Management Regulation
Volume 3, Chapter 10
scope of work for ship overhaul, maintenance, and repair beyond the end of the fifth fiscal year
following the expiration of such appropriations for other purposes.
100203.
Shipbuilding and Conversion (SCN), Navy Appropriation.
A.
The period of availability to incur obligations in the SCN appropriations
for all purposes normally is 5 years. However, for limited purposes, SCN finds are available for
obligation after the 5-year period has ended. Appropriation language for the SCN appropriation
often contains a provision to the effect that additional obligations for engineering services, tests,
evaluations, and other such budgeted work that must be performed in the final stage of ship
construction may be incurred after the appropriation otherwise would expire for obligation. This
additional period allowed for incurring new obligations for such purposes is called “extended
availability.”
B.
The Department of Defense and the Department of the Treasury employ
special procedures to establish extended availability authority for the SCN appropriations
because not all work required to induct a ship into the fleet can be completed within the first 5
years of availability of an SCN appropriation. The procedures are summarized as follows:
1.
The fiscal year of the latest obligation work limiting date (OWLD)
for the last vessel financed by a particular SCN appropriation will represent the period of
availability for obligation. After such date, the appropriation enters an expired status for 5 years
and the balances are available only for obligational adjustments and payments.
2.
An SCN appropriation is canceled/closed on September 30 of the
fifth year following the year of the last OWLD.
Before the end of each fiscal year, the
Department of Defense notifies the Department of the Treasury of the last OWLD for the SCN
appropriation that will be expiring on September 30 of that fiscal year. By the ninth workday of
November of each year, the unobligated and obligated balances of that SCN appropriation are
transferred by an SF 1151, “Non-Expenditure Transfer Authorization” to the new Treasury fiscal
year symbol.
3.
For example, on September 18, 1995, the Navy notified the
Department of the Treasury that the last OWLD for the FY 1991/1995 SCN appropriation was
September 30, 2001. Before November 14, 1995, the balances of that SCN appropriation were
transferred to the FY 1991/2001 SCN appropriation with a cancellation date 5 years later--
September 30, 2006.
C.
The obligated and unobligated balances of the merged SCN account are
not available for adjusting and disbursing purposes after September 30, 1993.
100204.
Obligation Adjustments for a Contract Change in Excess of $4 Million.
An obligation adjustment for a contract change under which a contractor is required to perform
additional work, may be incurred only if the obligation has been approved by the USD(C), as
designee of the Secretary of Defense.
Approval shall be sought when the amount of the
10-4
DoD Financial Management Regulation Volume 3, Chapter 10
obligation would cause the total amount of charges in any fiscal year for a single program,
project, or activity to exceed $4 million and the account being used to fund the obligations is no
longer available for new obligation.
A.
Requests for approval, if necessary, shall be submitted by the applicable
DoD Component to the ODC(P/B).
B.
Requests for approval shall include the following documentation:
1.
The amount to be obligated,
2.
The purpose for which the finds are to be obligated, and
3.
An explanation of the obligation adjustment including the reason
for the adjustment and the contingencies or management practices which caused the need for the
adjustment.
C.
Supporting documentation shall be retained for future reference.
100205.
Obligation Adjustments for a Contract Change of $25 Million or More.
Special handling is required to process any obligation adjustment to an expired appropriation for
a contract change, under which a contractor is required to perform additional work for amounts
in any fiscal year of $25 million or more. Such adjustments may be made only after the USD(C),
as designee of the Secretary of Defense, submits a notice of intention to make the obligation--
along with the legal basis and policy reasons for the obligation--to the Armed Services and
Appropriation Committees of the Senate and National Security and Appropriations Committees
of the House of Representatives.
A.
After 30 days have elapsed following submission of the notice, the
proposed obligation may be recorded (unless any cognizant congressional committee notifies the
USD(C) of its disapproval).
B.
Such charges or adjustments shall be supported by a written
comprehensive statement concerning the reason for the adjustment. This statement should
explain the circumstances, contingencies, or management practices which caused the need for the
adjustment.
C.
When notification to the Congress is necessary, the applicable DoD
Component shall submit the required documentation (including letters to the appropriate
congressional committees for the USD(C) signature) to the ODC(P/B).
100206.
Reprocurements. Expired funds also may be used to fund a replacement
action--replacement contract--under certain conditions. When a reprocurement action will result
in a replacement contract, it may be funded from expired funds if all of the conditions in para-
10-5
DoD Financial Management Regulation
Volume 3, Chapter 10
graphs 100206.A.-D., below, are met. (If all of the conditions cannot be met, current year funds
shall be used to fund the requested action.)
A.
The DoD Component has a continuing bonafide need for the goods or
services involved.
B.
The original contract was made in good faith.
C.
The original contract was terminated for default or for the convenience of
the government. If the original contract was terminated for the convenience of the governrnent,
the termination shall have been the result of a:
1.
Court order;
2.
Determination by a contracting officer that the contract award was
improper due to explicit evidence that the award was erroneous and when the determination is
documented with appropriate findings of fact and of law; or
3.
Determination by other competent authority (e.g., a Board of
Contract Appeals) that the contract award was improper.
D.
A reprocurement contract is used to obtain the goods or services that
originally had been ordered under another contract that was terminated either for default or
convenience of the government. The replacement contract is:
1.
Substantially of the same size and scope as the original contract
and
2.
Executed without undue delay after the original contract is
terminated.
E.
If a reprocurement action will result in an obligation which exceeds
$4 million, such action shall be submitted to the USD(C) for approval.
F.
If a reprocurement action will result in an obligation that exceeds
$25 million, a notice of intention (as discussed in subsection 100205., above), shall be submitted
to the congressional committees at least 30 days in advance. After 30 days have elapsed
following submission of the notice, the proposed obligation may be recorded unless one of the
cognizant congressional committees notifies the USD(C) of its disapproval.
100207.
Obligation Adjustments or Payments from Current Appropriations for
Canceled Accounts
A.
When making payments from a current appropriation account for
obligations of a canceled account, DoD Components must request a “subclass” account from the
10-6
DoD Financial Management Regulation
Volume 3, Chapter 10
Department of the Treasury, Requests for subclass accounts must be submitted in writing to the
Treasury Department, through the Defense Finance and Accounting Service, and include the
purpose for the payment. The address to which requests should be sent is listed in Treasury
Bulletin No. 91-03. These subclass accounts will be used to record applicable payments on the
books of the Treasury Department.
Such payments shall be reported monthly on each
Component’s Statement of Transactions.
B.
Amounts for obligations that otherwise would have been properly
chargeable to a canceled account, but are required to be charged to current accounts, shall be
recorded only in the current account when payment is imminent during the current fiscal year.
Therefore, amounts for such obligations shall not be reported on the year-end FMS Form 2108
unless payment has been made. However, if at year-end, such amounts for obligations are known
to be payable in the coming fiscal year, this information should be footnoted on the year-end
FMS Form 2108.
C.
Current year obligation adjustments required due to canceled balances
shall be entered against specific applicable line items in column k of DD Form 1416, “Report of
Programs,” as a negative amount. If these adjustments cause the line item to exceed current year
reprogramming thresholds, the amount in column k will be footnoted to indicate that the amount
is “applicable to canceled account adjustments.”
No reprogramming action will be required. In
addition, the total of all canceled account adjustments charged to the applicable appropriation
will be entered in column k as a separate line item titled “Reduction to Finance canceled Account
Adjustments.” This amount shall be shown as a positive number.
100208.
Use of Current Year Funds When Sufficient Obligational Authority Does
Not Exist in a Expired Appropriations. Section 1004 of the National Defense Authorization Act
for FY 1993 permits current year funds to be used when sufficient obligational authority does
not exist in expired appropriations for Fiscal Years before 1992 whose availability for new
obligations expired at the end of FY 1985 through
FY 1992, and which are not canceled. That
authority contains the following restrictions:
A.
The amount charged to a current account may not exceed an amount equal
to 1 percent of the total amount of the current appropriation being charged, or 1 percent of the
total amount of the appropriation of the expired account, whichever is less. (The 1 percent
limitation under section 1004 is in addition to the 1 percent limitation under Public Law 101-510
(see paragraph 100201.F., above) that applies to charges that can be made to a current account
when the account that should have been charged has been canceled.)
B.
The appropriate expired account shall be charged for obligations that are
properly chargeable to an expired account whenever sufficient resources exist to find the
obligation in the applicable expired account.
There should be no charges against a current
account if there is a sufficient balance remaining in an expired account.
C.
Obligations that otherwise would be properly chargeable to an expired
account, except that insufficient resources exist in the expired account to fund the applicable
10-7
DoD Financial Management Regulation
Volume 3, Chapter 10
obligation, should not be charged against a current account unless all of the following conditions
have been met:
1.
The obligation is charged to an appropriation available for the
same purpose as the applicable expired account and is otherwise properly chargeable (except as
to amount) to the applicable expired account before cancellation of the expired account.
2.
The Military Department Assistant Secretary for Financial
Management and Comptroller or the Comptroller of a Defense Agency has determined that
sufficient obligational authority does not exist in the applicable expired account to fund the
applicable obligation.
3.
The obligation is not otherwise properly chargeable to any
Department of Defense current appropriation.
4.
The USD(C) has approved the charge to the applicable
appropriation and notified the Congress of the proposed obligation, and 30 days have elapsed.
D.
The Department must notify the Congress 30 days in advance of incurring
such obligations.
Therefore, DoD Components shall prepare, and submit to the USD(C) for
subsequent transmittal to the Congress, notification of any proposed obligations against a current
account for obligations that otherwise would be properly chargeable (except as to amount) to an
expired account, except that insufficient resources exist to fund the obligation in the applicable
expired account. As a minimum, such notifications shall:
1.
Identify the amount to be charged,
2.
Identify the purpose for which the funds are to be obligated, and
3.
Include a summary of all relevant facts justifying the proposed
obligation.
E.
Within 60 days after the date of a request to charge an obligation is
submitted to the Congress, DoD Components shall submit a report to the USD(C), for
subsequent transmission to the Congress and the President, providing the status of an
investigation of an Antideficiency Act violation when:
1.
An obligation is charged against a current account when the
obligation otherwise would be properly chargeable (except as to amount) to an expired account.
2.
Insufficient resources exist to fund the obligation in the applicable
expired account.
10-8
DoD Financial Management Regulation
Volume 3, Chapter 10
100209.
Crediting of Collections After an Account is Canceled
A.
Valid accounts receivable shall not be written off as a result of
cancellations of appropriations with negative unliquidated obligations. Proprietary accounts
must be maintained until settled by the debtor.
B.
When collections that are authorized or required to be credited to an
account are received after the cancellation of an account, those collections should be deposited in
the departmental receipt account 3200, Collection of Receivables from Canceled Accounts.
Accounting entries for crediting of collections after an account is canceled are contained in
Appendix A.
100210.
Exceptions to Periods of Availability of Accounts for Adjusting and
Liquidating Obligations
A.
Requirements applicable to the cancellation of appropriations apply to all
appropriation accounts unless specifically exempted by statute. A provision of an appropriations
act may exempt an appropriation from the provisions of the new requirements for the closing of
accounts and may fix the period for which an appropriation remains available for expenditure
(31 U.S.C. 1557). Additionally, an appropriations act applies only to a specific fiscal year’s
appropriation. However, in order to preclude application to an appropriation of the limitations on
expenditure provided in the new provisions of Title 31, the statute must:
1.
Identify the appropriation account for which the availability for
expenditure is to be extended.
2.
Provide that the appropriation account shall be available for
adjusting and liquidating obligations properly chargeable to the account, and
3.
Extend the availability for expenditure of the obligated balances.
B.
The availability for expenditure of specific accounts maybe changed only
through specific legislation. This authority shall be requested only when payment of old balances
from unexpired funds (based on historical outlay data) regularly would exceed the
1 percent limitation or would severely impact the current program.
1.
When the nature of a DoD Component’s program requires
disbursements beyond the 5-year period, the DoD Component shall submit proposed changes in
appropriation language to the ODC(P/B). The ODC(P/B) shall submit the proposed changes to
the Office of Management and Budget for approval.
2.
Absent specific authority, DoD Components, through the
ODC(P/B), may seek reappropriations of canceled balances and defer payment until the
10-9
DoD Financial Management Regulation
Volume 3, Chapter 10
appropriation is available. Receiving a reappropriation will be treated as adding new budget
authority.
100211.
Antideficiency Act Violations.
DoD Components are required to
investigate and report violations of the Antideficiency Act when certain limitations are exceeded
in Public Law 101-510 and section 1004 of Public Law 102-484 as well as specific provisions in
a number of sections of Title 31 of the United States Code. Explicit guidance is provided in
Volume 14 of this Regulation.
100212.
Control, Reporting, and Certification Requirements. Title 31, United
States Code, sections 1554 and 1556, as amended, contains permanent audit, control and
reporting requirements pertaining to the liquidation of obligations.
A.
Control Requirements
1.
Section 1554(a) stipulates that any audit requirement, limitation on
obligations, or reporting requirement applicable to an appropriation will continue to apply to that
appropriation following expiration of the period of availability for new obligation of that
appropriation. Thus, if an appropriation act contains a limitation on the obligation of funds for a
program, project or activity, or other purpose, then that limitation will continue to apply during
the 5-year period following the period of availability for obligation of that appropriation.
Additionally, the limitation will continue after the appropriation has been canceled.
2.
DoD Components shall establish internal controls to ensure that an
adequate review of obligated balances is performed to support the certification.
3.
Proper general ledger controls shall be maintained for canceled
valid unpaid obligations and accounts receivable in canceled accounts. Although balances in
unexpired accounts may be used to fired canceled obligations, canceled obligated balances shall
not be posted to unexpired accounts solely because the purposes may be related. Canceled
obligations shall be posted to unexpired accounts only when a disbursement will be paid during
the current year.
B.
Reporting and Certification Requirements
1.
Section 1554. Under the provisions of 31 U.S.C. 1554, the
Secretary of Defense, or his designee, is required to submit a report to the President and the
Secretary of the Treasury concerning the unliquidated obligations, unobligated balances, canceled
balances and adjustments made to appropriation accounts during the preceding fiscal year.
a.
Due Date. This report is due not later than 15 days after the
President submits his budget to the Congress.
The first report was due in 1992 for
FY 1991
balances and transactions.
10-10
DoD Financial Management Regulation Volume 3, Chapter 10
b.
Distribution Requirements. A copy of the report is required
to be submitted to the Speaker of the House of Representatives and to the Committee on
Appropriations, the Committee on Governmental Affairs, and other appropriate oversight and
authorizing committees of the Senate (such as the Armed Services Committee).
c.
Contents. Section 1554(b) requires that these reports shall
contain:
(1)
An itemization of related appropriation accounts,
identified by fiscal year and the balances identified in each account. This itemization is reported
on the fiscal year-end FMS Form 2108.
(2)
A listing of each current and expired appropriation.
This list is included in the fiscal year-end FMS Form 2108.
(3)
Identification of payments made from each currently
applicable appropriation account with respect to those amounts which would have been
otherwise properly chargeable to another account, both as to purpose and amount, except that the
other account has been canceled (31 U.S.C. 1553). These payments are reported on the DoD
Components’ Statement of Transactions.
(4)
Separate identification of obligation adjustments
made to each currently applicable appropriation account that otherwise would have been properly
chargeable to another account, both as to purpose and amount, except that the other account has
been canceled. These amounts are reported on the fiscal year-end FMS Form 2108.
(5)
Identification of all balances canceled on September
30th of the fifth year following the expiration of an appropriation account’s availability for
incurring new obligations (31 U.S.C. 1552(a)). These balances are reported on the fiscal year-
end FMS Form 2108.
(6)
Identification of those appropriation accounts
available for an indefinite period that have been canceled because (a) no disbursements have
been made from the account for a period of 2 years and (b) the President or the Secretary of
Defense has determined that the purposes for which the appropriation was made have been
carried
out
(31 U.S.C. 1555).
(7)
A certification by the DoD Components that the
obligated balances in each appropriation account of the Department reflect properly existing
obligations and that expenditures made from each account since the time of submission of the
prior report were supported by a proper obligation of funds and otherwise were proper.
10-11
DoD Financial Management Regulation
Volume 3, Chapter 10
100213.
Other Procedures. The following paragraphs provide detailed information
about other review, accounting, and correction procedures regarding current and expired
accounts.
A.
Apportionment Procedures. The apportionment schedules (DD
Form 1105) will reflect the following footnote:
“Up to one percent of the original amount of the
appropriation ($ xxx.xx),
or the unobligated balance, whichever is less, may be utilized for the
purpose of obligation adjustments and payments, which would otherwise have been properly
chargeable (both to purpose and amount) to a canceled appropriation.” To the extent that supple-
mental appropriations are enacted, reapportionment of the initial “one percent” amount may be
requested.
B.
Unliquidated Obligations.
DoD Components shall review remaining
unliquidated balances in expired accounts, and prior to cancellation, deobligate all amounts not
supported by documentary evidence.
C.
Payments After Cancellation of Appropriations. Amounts presented for
payment that cite appropriations that have been canceled (appropriations beyond the end of the
fifth year following the expiration of their availability for incurring new obligations) shall not be
paid until the disbursing office has obtained a currently available appropriation fund cite from the
funding activity.
D.
Unmatched Disbursements for Canceled Accounts. When a disbursement
is made properly before the cancellation of the appropriation to which an obligation was charged,
but is not identified and matched with the proper obligation until after the cancellation of the
appropriation, that disbursement shall be charged to the canceled appropriation. Appropriate
corrections to accounting records and reports shall be made as necessary. See paragraph
100212.J., below, if an error is discovered in a canceled account for a disbursement made prior to
the cancellation of that account.
E.
Negative Unliquidated Obligations.
Negative unliquidated obligation
balances generally occur in an account when valid disbursements are incorrectly matched with
obligations and the disbursements exceed the obligations. Negative balances represent error
conditions which should be researched and corrected as quickly as possible. For additional
guidance regarding negative unliquidated obligations, see chapter 11 of this volume.
F.
Line Item Detail. The level of detail required to be maintained for expired
accounts is the same as that required to be maintained for current accounts. The level of detail
should facilitate cost determinations and program assessment and evaluation, while maintaining
an appropriate level of visibility over expired accounts, providing an appropriate audit trail, and
meeting the objectives of the closing accounts legislation.
G.
Uncollectible Accounts Receivable.
Appendix A contains appropriate
entries to account for uncollectible accounts receivable in canceled accounts. A write-off of an
uncollectible reimbursement receivable does not change total obligations within budgetary
10-12
DoD Financial Management Regulation
Volume 3, Chapter 10
accounts.
However, such write-off would result in a reclassification, to a direct program
obligation, of an obligation previously incurred.
H.
Closing an Account with a Negative Balance. Existence of a negative
balance does not excuse an account from being canceled. Such accounts should be canceled in
accordance with applicable valid requirements and a receivable established for the amount of the
negative balance.
1.
Informational accounting reports (i.e., FMS 2108, SF 133, and
SF 220-9) shall continue to be submitted for the applicable account until the negative balance is
resolved. As appropriate, these informational reports should (a) indicate that the account is
canceled, (b) show the amount of the negative balance at the time the account was canceled, and
(c) show the current amount of the applicable receivable.
2.
A negative balance may be liquidated by receiving offsetting
collections. Collections of overpayments shall be deposited to Treasury account 3200. An
account with a negative balance may indicate that a violation of the Antideficiency Act has
occurred. A formal investigation should be initiated immediately. Additional information on
Antideficiency Act violations maybe found in Volume 14 of this Regulation.
I.
Accounting for Uncollectible Accounts Receivable in Canceled Accounts.
Budgetary accounts corresponding to accounts receivable shall be closed when an account is
canceled. Total obligations within budgetary accounts should not change when the budgetary
accounts are closed. The write-off of an uncollectible reimbursement receivable would result in
a reclassification, to a direct program obligation, of an obligation previously incurred under the
reimbursable program.
1.
For refunds receivable, budgetary accounts established to track the
status of obligational authority (i.e., undelivered orders, unpaid accrued expenditures and refunds
due) shall not be closed since their continued identity is necessary to assure that cumulative
payments, even though paid from a current account do not exceed the original appropriation of
the closed account.
2.
Propriety accounts established for accounts receivable and refunds
receivable applicable to canceled accounts shall be reclassified as Accounts Receivable--
Canceled Accounts.
The subsequent collections of such amounts for this account shall be
deposited to the Treasury Miscellaneous Receipts Account.
3.
If, after compliance with established collection procedures, it is
determined that an account is uncollectible, the account should be written off by charging a bad
debts account. The write-off of an uncollectible account or refund receivable applicable to the
reimbursable program should result in a reclassification, to a direct program obligation, of
obligations previously incurred under the reimbursable program.
10-13
DoD Financial Management Regulation
Volume 3, Chapter 10
J.
Correction of Reporting Errors in Expired Accounts. Treasury Bulletin
94-04, "Account Closing Provisions of the FY 1991 National Defense Authorization Act"
contains procedures for requesting a correction to an expired account that is now closed.
1.
Corrections may be requested for two categories of errors: (a)
clerical errors such as misplaced decimals, transposed digits, or transcribing errors resulting in
inadvertent cancellations of budget authority and (b) errors made in classifying a payment made
prior to the closing of an account, but not discovered until after the account was closed.
a.
For clerical errors, the request must include the
appropriation account number, the reason for the restoration, and convincing evidence of the
clerical error to justify the restoration required to make the correction. At a minimum, this
includes the original accounting record from which the incorrect posting was made and a record
showing the incorrect amount.
b.
For classification errors, the Treasury Department will
accept reporting to (1) correctly classify payments previously reported to suspense/clearing
accounts or (2) correct classification errors between current and closed accounts, when submitted
by the deadline below.
2.
Requests for the correction of errors must be received by the
Treasury Department by March 31 of the year after the account in question was closed. For
example, if an expired account was closed in FY 1996, a request for any corrections to that
account must be received by the Treasury Department before March 31, 1997.
the following address:
following address:
a.
b.
Requests for correction of a clerical error should be sent to
Finance Management Branch
Financial Management Service
Department of the Treasury
Liberty Center (UCP 723)
Washington, DC 20227
Requests for reporting to be allowed against a closed
account shall be submitted, along with a hardcopy Statement of Transactions report, to the
Budget Reports Branch
Financial Management Semite
Department of the Treasury
Liberty Center (UCP 749)
Washington, DC 20227
10-14
DoD Financial Management Regulation
Volume 3, Chapter 10
3.
If a request for the correction of errors affects another DoD
Component, such requests must be coordinated with the affected DoD Component and submitted
to the Defense Finance and Accounting Service (DFAS), Deputy Director for Accounting,
1931 Jefferson Davis Highway, Arlington, VA 22240-5291. The DFAS will submit the requests
to the Treasury Department after completion of its review.
4.
Comptroller General Decision B-251287.3, dated November 1,
1995, stated support for Treasury Department adjustment of DoD canceled appropriation account
balances, without regard to administratively established timeframes (contained in Treasury
Bulletin 94-04, which is discussed above), to reflect disbursements made before cancellation of
the accounts. The CG decision requires that any adjustment made by the Department of Defense
be supported by documentary evidence and be able to withstand audit scrutiny. To implement
this decision, the USD(C) had issued procedures on June 30, 1995, mandating the research and
correction of unmatched disbursements and negative unliquidated obligation transactions and
processing the resulting adjustments to the Treasury Department. For further information, see
chapter 11 of this volume.
100214.
Processing Invoices Involving Canceled Fiscal Year Funds. Appendix B,
“Questions and Answers Pertaining to Recessing Invoices from Canceled Fiscal Year Funds,”
provides detailed procedures for processing such invoices.
10-15
DoD Finacial Management Regulation
Volume 3, Chapter 10, Appendix A
APPENDIX A
ACCOUNTING ENTRIES FOR CREDITING OF COLLECTIONS
1.
Public Law 101-510, Section 1405 (31 U.S.C. 1552), “Procedure for appropriation
accounts available for definite periods,” stipulates the following:
“a. On September 30th of the 5th fiscal year after the period of availability for obligation
of a fixed appropriation account ends, the account shall be closed and any remaining
balance (whether obligated or unobligated) in the account shall be canceled and thereafter
shall not be available for obligation or expenditure for any purpose.”
“b. Collections authorized or required to be credited to an appropriation account, but not
received before closing of the account under subsection (a) or under section 1555 of this
title, shall be deposited in the Treasury as miscellaneous receipts.”
2.
As noted above, P.L. 101-510 requires that all balances are closed and any collections
received after closing are deposited to the Treasury Miscellaneous Receipts Account following
the end of the 5th year after expiration of an account. Thus, the following procedures are
applicable to accounts receivable and refunds receivable. Accounts receivable are amounts due
from others for goods furnished and services rendered. Refunds receivable are requested returns
of advances or recoveries of erroneous disbursements that are directly related to, and reductions
of, previously recorded payments from the accounts.
3.
Budgetary Accounting Entries
a.
Accounts Receivable. Budgetary accounts corresponding to accounts receivable
shall be closed as follows:
Dr 4222
Customer Orders Accepted
Cr 4252 Reimbursements Earned - Uncollected
Total obligations within budgetary accounts should not change as a result of the above entry.
However, the write-off of an uncollectible reimbursement receivable would result in a
reclassification, to a direct program obligation, of an obligation previously incurred under the
reimbursable program.
b.
Refunds Receivable.
Refunds receivable applicable to a direct program are
recorded in general ledger account 4932, “Accrued Expenditures - Refunds Due - Direct
Program.” Refunds receivable applicable to the reimbursable program are recorded in general
ledger account 4942, “Accrued Expenditures - Refunds Due - Reimbursable Program.” These
accounts represent amounts due to be returned from previously made liquidated obligations
(Accrued Expenditures - Paid). Budgetary accounts established to track the status of obligational
authority (i.e., undelivered orders, unpaid accrued expenditures and refunds due) shall not be
10-16
DoD Financial Management Regulation
Volume 3, Chapter 10, Appendix A
closed since their continued identity is necessary to assure that cumulative payments, even
though paid from a current account, do not exceed the original appropriation of the closed
account.
4.
Proprietary Accounting Entries
Proprietary accounts established for “Accounts Receivable” and “Refunds Receivable”
applicable to canceled accounts shall be reclassified as “Accounts Receivable - Canceled
Accounts.”
The subsequent collections of such amounts should be deposited to the Treasury
Miscellaneous Receipts Account. Until other formal accounting entries are published, the
following entries should be used:
a.
To reclassify accounts receivable upon cancellation of the account and recognize
the liability to deposit collections into the Treasury Miscellaneous Receipts Account.
Dr 1310X
Accounts Receivable - Canceled Accounts 1/
Cr 1311-14 Accounts Receivable
Cr 1315-16 Refunds Receivable
and
Dr 3610
Uncollected Revenue - General Fund - Miscellaneous Receipts
Cr 2411
Deposit Fund Liabilities
1/
The "X" following account number 1310 indicates that a formal account for this purpose
does not currently exist in the DoD Uniform Chart of Accounts.
b.
To record collection of canceled accounts receivable.
Dr 1011
Funds Collected
Cr 1310X
Accounts Receivable - Canceled Accounts
c.
To record deposit after collection, of accounts receivable - canceled accounts to
the Treasury Miscellaneous Receipts Account.
Dr 2411
Deposit Fund Liabilities
Cr 1012
Funds Disbursed
and
Dr 3620
Funds Returned to General Fund Miscellaneous Receipts
Cr 3610
Uncollected Revenue - General Fund -
Miscellaneous Receipts
10-17
DoD Financial Management Regulation
Volume 3, Chapter 10, Appendix A
5.
If, after compliance with established collection procedures, it is determined that an
account is uncollectible, the following entries should be made:
Dr 6129
Bad Debts
Cr 1310X
Accounts Receivable - Canceled Accounts
and
Dr 2411
Deposit Fund Liabilities
Cr 3610
Uncollected Revenue - General Fund - Miscellaneous
Receipts
The write-off of an uncollectible account or refund receivable applicable to the reimbursable
program should result in a reclassification, to a direct program obligation, of obligations
previously incurred under the reimbursable program. (The write-off of an uncollectible refund
receivable applicable to the direct program does not require reclassification.) The reclassification
of an uncollectible account or refund receivable applicable to the reimbursable program may be
accomplished through the following two entries:
a.
To eliminate unliquidated reimbursable program obligations, the following entries
should be made. (Note: Liquidated reimbursable program obligations previously should have
been eliminated through the account closing process.)
Dr 4820
Undelivered Orders - Reimbursable Program
Dr 4920
Accrued Expenditures - Unpaid - Reimbursable Program
Dr 4942
Accrued Expenditures - Refunds Due - Reimbursable Program
Cr 4582
Allotted Reimbursable Program
b.
To reclassify the canceled reimbursable program unliquidated and liquidated
obligations as canceled direct program obligations, the following entries should be made.
Dr 4611
Uncommitted/Unobligated Allotments - Direct Program
Cr 4810 Undelivered Orders - Direct Program
Cr 4910
Accrued Expenditures - Unpaid - Direct program
Cr 4931
Accrued Expenditures - Paid - Direct program
6.
It should be observed that a write-off of uncollectible accounts receivable does not
increase total obligation balances in budgetary accounts. However, as noted previously, the
write-off of a receivable would result in a reclassification of obligations from the reimbursable to
the direct program.
7.
A reimbursable order provides obligation authority. Obligation authority is provided by
(a) the acceptance of a reimbursable order from other Federal Government accounts that
represent obligations of the ordering account and (b) orders from the public, including state and
local governments, to the extent accompanied by an advance. This obligation authority is used
10-18
DoD Financial Management Regulation Volume 3, Chapter 10, Appendix A
(obligated) by the performing activity in fulfilling the accepted order. Fund resources to liquidate
reimbursable obligations in the performing activity’s account are obtained through payments
from the ordering account. Payments may be in the form of advances, progress payments, or
final payment upon completion of the order. In the absence of such a payment fund resources
are paid from the direct program authority of the performing account.
8.
To the extent that (a) obligations, due to the reclassification of reimbursable program
obligations, are in excess of direct program obligation authority, or (b) expenditures (liquidation
of obligations) are in excess of appropriated funds plus reimbursements expected to be earned
and collected, there is a violation of the Antideficiency Act. For additional guidance on
violations, see Volume 14 of this Regulation.
9.
The status of obligated and unobligated balances in direct and reimbursable programs,
even in an account which has been closed, must be continuously maintained. If direct program
unobligated balances in a closed account are sufficient to absorb the reclassification of
reimbursable program obligations, the charging of write-offs of uncollectible receivables to
current year accounts does not appear necessary.
a.
The presence of a sufficient existing unobligated balance in a closed account in a
direct program is determined by deducting from the unobligated balance at the time of
cancellation all amounts charged to current appropriations which otherwise would have been
chargeable to the closed account, both as to purpose and in amount, except that the account was
canceled. Thus, if obligations and/or expenditures are incurred against a reimbursable order, and
if that reimbursable order later is declared uncollectible, then a violation would exist to the extent
that appropriated (direct program) resources existing in a closed account are not sufficient to
absorb those obligations and/or expenditures.
b.
Thus, to avoid a violation of the Antideficiency Act, the presence of a sufficient
unobligated balance in an existing direct program must exist in a closed account to absorb the
reclassification of uncollectible reimbursable program receivables. However, in accordance with
closing account legislation, the actual payment of an amount originally obligated in an account
that has since closed shall be made from a current account available for the same purpose subject
to the 1 percent limitation.
10-19
DoD Financial Management Regulation Volume 3, Chapter 10, Appendix B
APPENDIX B
QUESTIONS AND ANSWERS PERTAINING TO PROCESSING INVOICES FROM
CANCELED FISCAL YEAR FUNDS
1.
Should contract modifications be issued to obligate current year funds?
Answer: Contract modifications citing current year funds for unpaid amounts are not
required simply because previous valid obligations were from appropriations subsequently
canceled. The document providing the chargeable fund cite to the disbursing officer should be
used as the obligation document at the time of payment. Additionally, applicable contracts
should be annotated to indicate the appropriation from which the payment was made.
2.
Are there invoice submission cut-offs for subsequent expiration dates?
Answer: Cut-off dates involving expired account transactions should be no different than
for other transactions. However, special efforts should be made to ensure that all valid invoices
citing accounts subject to cancellation are processed before
the account is canceled. The official
cancellation date is September 30. Therefore, all valid invoices dated as of September 30 may be
charged against an account before it is canceled.
3.
Are there any prohibitions against reallocating previous payments to oldest year funds in
the contract?
Answer: The Department’s current policy provides for progress payments to be identified
to the appropriate contract line/fiscal year.
Only when such an identification is not feasible
should the amounts be allocated to contract lines or fiscal years. In the absence of contractor or
program management identification, current guidance permits such allocations to be made to the
oldest fiscal year. For previous allocations, if the benefiting fiscal year is known, the applicable
amounts should have been charged to the benefiting fiscal year. However, if the benefiting fiscal
year is unknown and amounts already have been allocated, there is little basis for reallocating
those funds to the oldest fiscal year.
4.
What is the definition of payment adjustments as they relate to Public Law 101-510?
Answer: Payment adjustments may result from escalation or economic price adjustments,
or from final audit and settlement. Payment adjustments exclude contract changes and changes
in scope as well as any other change that results in additional contractor billable costs.
5.
How should adjustment billings submitted by a contractor as a result of definitization of a
contract be handled?
Answer: If the definitization of a contract results in an additional amount due to the
contractor, and the additional amount would be chargeable to a canceled appropriation, then
10-20
DoD Financial Management Regulation
Volume 3, Chapter 10, Appendix B
current year funds must be requested.
If the definitization results in an amount due from the
contractor which would have been credited to a canceled appropriation, that amount must be
credited to miscellaneous receipts account 3210. However, amounts due to expired, but not yet
canceled, appropriations should be credited to the expired appropriation.
6.
What is the process for the payment office to request current year funds to pay an invoice
in-house?
Answer: Within 48 hours after receipt of an invoice payable from canceled funds, the
disbursing officer shall: (a) identify the budget office funding the contract by contacting the
fiscal office and (b) notify the head of the office, installation, or activity in which the budget
office is located of the need for funds. Only the net amount required (total amount less progress
payments paid) shall be requested. Notification should be by message, express mail or facsimile
and should include identification of the contract, contractor, invoice date, invoice amount, and
payment due date (including DoD required payment data for progress payments and interim
vouchers). The disbursing officer shall provide copies to the procurement contracting officer.
The office, installation, or activity funding the contract should notify the disbursing
officer or replacement funds chargeable to an appropriation currently available for the same
purpose. This notification should be transmitted by message, express mail or facsimile as soon
as possible, but no later than 15 calendar days from the date of the disbursing officer’s request. If
replacement funds cannot be provided within 15 calendar days, an estimate should be provided as
to when the funds are expected to be available.
10-21
DoD Financial Management Regulation
Volume 3, Chapter 10, Appendix C
APPENDIX C
DEFINITIONS
1.
Adjustments to Expired or Closed Accounts. Increases or decreases to commitments,
obligations, or expenditures.
Adjustments include recording commitments, obligations, or
expenditures that were made or incurred during the period prior to expiration or cancellation of
the account but not recorded.
2.
Closed/Canceled Accounts.
Accounts with balances that have been canceled under
Title 31, United States Code, sections 1552, 1555, or 1557. Once balances are canceled, the
amounts are not available for obligation or expenditure for any purpose.
3.
Expired Accounts. Appropriation or fund accounts in which the balances no longer are
available for incurring new obligations because the time available for incurring such obligations
has expired. There are various types of expired accounts:
a.
Expired Accounts Established Under P.L. 101-510.
Expired accounts that
(1) contain unliquidated obligated and unobligated balances, (2) maintain their fiscal year identity
for five years, and (3) are available for recording, adjusting, and liquidating obligations properly
chargeable to that account. These accounts began with balances that expired on September 30,
1991.
b.
Expired Accounts (established before November 5, 1990) that were not
Transferred to the “M” Accounts or Canceled. Accounts that (1) contain obligated balances that
expired on September 30, 1989, and September 30, 1990; (2) contain unobligated balances that
were restored from surplus funds; and (3) maintain their fiscal year identity until their balances
are canceled on September 30, 1994, and September 30, 1995, respectively.
c. "M" Accounts (Established before November 5, 1990).
Expired accounts that
(1) contain unliquidated obligated balances and (2) have been merged with unliquidated
obligated balances from prior years.
"M" accounts generally are established by appropriation
title (e.g., Operation and Maintenance, Procurement, Research and Development) for the same
general purpose. No new "M" accounts will be established; all such accounts were canceled on
September 30, 1993.
d.
Merged Surplus Authority (Established before November 5, 1990).
Expired
accounts with (1) balances that were available for upward adjustments to prior obligations that
were previously incurred and (2) were canceled on December 5, 1990. These were obligated
balances withdrawn by the Treasury Department for accounts which have been expired for more
than two years.
10-22
DoD Financial Management Regulation
Volume 3, Chapter 10, Appendix C
4.
Fixed Accounts. Appropriation or fund accounts with balances that are available for a
definite period of time. The fixed accounts are comprised of annual and multi-year accounts.
The universe of appropriation or fund accounts is made up of fixed accounts and no-year
accounts.
5.
Section 1004 Obligations. For purposes of implementing the provisions of section 1004
of P. L. 102-484, the term “obligation” means any binding agreement properly chargeable to a
fiscal year that is expected to result in an outlay.
An obligation includes, but is not limited to, an
upward obligation adjustment or a reobligation.
6. Unexpired Accounts. Appropriation or fund accounts in which the balances are available for
incurring obligations because the time available for incurring such obligations has not yet
expired. Audit requirements, limitations on obligations, and reporting requirements applicable to
unexpired accounts shall continue to apply after the end of the period of availability for
obligation or expenditure of that account.
7. Unrecorded Obligations. Obligations that were incurred legitimately during the period of
fund availability, but were not recorded in the Component’s records prior to expiration of the
appropriation or fund. For purposes of this guidance,
“unrecorded” obligations are included in
obligation adjustments. Current accounts may be used to pay previously unrecorded obligations
chargeable to a closed account.
10-23
DoD Financial Management Regulation
Volume 3, Chapter 10, Appendix C
(This page intentionally left blank.)
10-24
